How to revive Canada’s dream of social democracy

TheStar.com – opinion/editorials
Published On Sat Nov 26 2011.    Tom Kent

The following is a condensed version of a longer paper that Tom Kent, who died at age 89 on Nov. 15, wrote for the Broadbent Institute. The full text, with detailed policy proposals, can be found at www.broadbentinstitute.ca/tom-kent. While the views expressed are Tom Kent’s own, the Broadbent Institute is grateful for the support of this great Canadian social democrat and pleased to release his essay for publication. — Ed Broadbent

Social democracy, as I understand it, is a society where the enterprise of productive employment in a market economy is joined with active government to secure the public interest in equality of opportunities and fairness of outcomes.

Our unusually decentralized federalism creates a distinctively Canadian obstacle to social democracy. The delivery of services crucial to it – notably health care, education, social assistance – is, for most recipients, in exclusively provincial jurisdiction. That is why we were laggards in the postwar development of the welfare state. It was not until the 1960s that we contrived the instruments of cooperative federalism required to catch up with more centralized political systems.

They were effective instruments, for their time. But that time was short. Our social transformation of the 1960s has been followed by decades of little further advance. The political cooperation essential for it has been replaced by confused conflict in the relations between Ottawa and the provinces. This paper suggests a new initiative that could break the deadlock.

The consequence of betrayal

In the 1960s Ottawa undertook to reimburse 50 per cent of provincial spending on physician and hospital health care, on postsecondary institutions, on social services and assistance, provided only that the program expenditures conformed to broadly defined principles. Some provinces grumbled about being pressured, but took and used the money. Outstanding social reforms quickly resulted. But the very success of the device was soon its undoing. The federal popularity of the programs made the cost-sharing device politically flawed because increasingly it was the provinces that got the credit.

The original cost sharing for “welfare,” under the Canada Assistance Plan, continued through the 1980s, but the plea of financial stringency was used to limit the federal contribution below 50 per cent. Finally, in the 1995 budget, all pretence of commitment was abandoned. The federal contribution to provincial programs became whatever Ottawa declared it could afford. In 1996 it was not 50 but 15 per cent.

The rhetoric of conflict became the dominant, indeed almost the only, relationship between provincial and federal governments. The provinces have rightfully gained the upper hand in public sympathy, driving “the feds” to begin restoration. In 2004, in its last desperate days, the Martin government negotiated the “accord” that has committed Ottawa to 10 years of increasing funds, in exchange for much profession of intended improvements in medicare. The results have been little more than trifling.

Conservatives commonly claim that opinion has shifted to the right, that people want less government. The evidence is rather that they have lost faith in the capacity of our political system to deliver the kind of government most Canadians want. That is reflected both in the low turnout at elections and the recent strength, among those who did go to the polls, of the party that had long gathered little more than a protest vote.

There will be no reforming government, however, until either the NDP or a revitalized Liberal party has developed, and taken to the electorate, a realistic agenda for social democracy.

After cost-sharing

A major obstacle to that is that cost-sharing is still deeply revered, 40 years too late, as the necessary instrument of social action in our federalism. But, as often, delusion is rooted partly in confusion. There are two kinds of cost-sharing, for programs and for projects. The second remains a clear necessity. We will not clean up our environment unless Ottawa supports provinces and municipalities in the extensive modernization of many infrastructures. Recent experience has also underlined the role of speed in such projects as one way to fend off unemployment; and cost-sharing of projects has the massive political appeal that when the money is spent, the building done, federal MPs can share also in the glory of photo-op ribbon cutting.

Indefinitely continuing finance for continuing programs is utterly different politics. For Ottawa its dividend in popularity proved to fade while the cost went on, and for the provinces it consequently turned into a cheat. This does not prevent well-meaning reformers demanding cost-sharing because they know no other way to make their concerns seem realistic. It may not prevent a party in opposition talking of a cost-shared program. But any idea that it can be implemented by politicians in office is idle fantasy; and until that idea is finally broken, social democracy will have no future.

There are precedents for what will work now. The first three measures towards social democracy were purely federal, not federal-provincial, measures. Unemployment and old-age security required constitutional amendments to transfer jurisdiction to Ottawa. That procedure is not open now, or likely to become so.

But the third measure, the first directed broadly against family poverty, used the federal spending power for a benefit delivered directly to people. The baby bonus was a federal cheque mailed to all mothers. While it has been replaced by the more sophisticated, and more avowedly egalitarian, child tax credit, the same purpose continues to be served by a directly federal program.

In sum

Federal spending power can be used to sustain all the social programs required by social democracy. Poverty can be most effectively countered by a refundable credit in federal income tax. Many more, and better, child-care and early education spaces are needed, administered provincially, and can be made equitably available by federal empowerment of parents with subsidies ranging from 90 per cent to zero for the wealthy.

Post-secondary education can be made universally accessible by federal advances of its cost, recovered as to capital and interest by a progressive surtax on subsequent earnings. A similar program can revolutionize the skills training that is now so inadequate for productively high employment in the globalized economy. Though the mechanics of its financing are more complex, the rescue of medicare equally requires direct federal concern with service to people. It can be achieved by genuine cost-sharing conditional on the reform of primary care delivery and the provision to children of comprehensive preventive care.

There is the same scope for social democratic programs in the later 2010s as there was for an earlier stage in the 1960s. There is no reason to doubt the popular appeal, as long as its proponents are convincingly realistic about its financing. They have to say how they would make the substantial increase in revenue that social democracy requires.

Unfortunately, many get no further than talk of higher tax rates on corporate profits and incomes from them. The public generally has the common sense to recognize such unrealism. Increases in such taxes, on the scale required, would be disastrous for the economy.

Federal revenues can indeed be much increased, but only by extending the bases from which taxes are effectively collected. The NDP, as well as such left wing as remains in the Liberal party, have been as yet too timid to embrace and popularize progressive tax reform.

To that our federalism is no obstacle. All means of taxation are constitutionally federal. The need of the next year or two is that thoughtful people close to politics develop practical details both for social programs and for accompanying tax reform. The need of the following two years is that politicians develop the will and the skill to make such a package central to the federal election of 2015.

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